Do accruals-based accounting earnings provide better information to investors about future operating cash flows than operating cash flows themselves, as predicted by FASB's conceptual framework? The most recent evidence (Nallareddy et al., 2020) is that operating cash flows, measured correctly...

A substantial literature investigates conditional conservatism, defined as asymmetric accounting recognition of economic shocks (ldquo;newsrdquo;), and how it depends on various market, political and institutional variables. Studies typically assume the Basu (1997) asymmetric timeliness...

The choice between fair value and historical cost accounting is the subject of long-standing controversy among accounting academics and regulators. Nevertheless, the market-based evidence on this subject is very limited. We study the choice of fair value versus historical cost accounting for...

I develop a new approach to understanding accounting accruals. I start by introducing a model that explicitly incorporates the role of accruals in measuring firm performance. Using this model, I characterize accounting quality by the degree to which accruals fulfill their performance measurement...

We explore revealed preferences for the contractual treatment of changes to GAAP in a large sample of private credit agreements issued by publicly held U.S. firms. We document a significant time-trend towards excluding GAAP changes from the determination of covenant compliance over the period...

I provide new evidence on the renegotiation of financial contracts using a comprehensive sample of over 90,000 debt contract renegotiations. I study whether the demand for monitoring determines the renegotiation intensity, defined as either the renegotiation frequency over a period of time or...

The new accounting standard requires that _nancial institutions provision for life-time expected losses on their loan portfolios. We develop a model for estimating long-term expected loan losses that incorporates a wide range of bank- and aggregate-level predictors of future losses. The model...

We propose an empirical measure of firms' metering problems. We build on the notion that metering problems are reflected in the intensity with which firms apply Generally Accepted Accounting Principles (GAAP) to map economic transactions onto financial statements. We develop an algorithm to...

Asset pricing models implicitly assume that firm characteristics are context-free. At the same time, companies provide a substantial narrative context that helps investors to put numeric information in perspective. Management may discuss non-quantitative factors that influence performance, such...

Generative AI tools such as ChatGPT can fundamentally change the way investors process information. We probe the economic usefulness of these tools in summarizing complex corporate disclosures using the stock market as a laboratory. The unconstrained summaries are dramatically shorter, often by...